Report on coal fields creates fresh furor for Indian government

Indian Prime Minister Manmohan Singh faces new allegations of mining deals that deprived the treasury of $211 billion.

Story highlights

An audit found billions in lost revenue from coal field allocations, says Indian paper

The auditor says the newspaper report is "exceedingly misleading"

The government has already been damaged by a cell phone license scandal

"This is the worst scam," says an opposition leader

India's scandal-tainted government has come under fresh attack from opposition parties after a leading newspaper ran a front-page report alleging that auditors had found that the awarding of coal fields to private companies had deprived the treasury of $211 billion.

As lawmakers from across the spectrum of opposition parties criticized Prime Minister Manmohan Singh's administration over the Times of India story on Thursday, his office issued excerpts of a letter to him from the federal auditor that described the news report as "exceedingly misleading."

One of the country's most respected dailies, the Times of India cited what it said were the Comptroller and Auditor General (CAG)'s draft estimates from the awarding of 155 coal blocks to some 100 firms without auction between 2004 and 2009.

The newspaper said the government had allocated areas for coal production to commercial operators without putting them up for competitive auction. According to the CAG's calculations, the newspaper said, the authorities sold the rights to the mining areas for much less than they were worth, passing on "undue benefits" to the companies.

The report claimed the loss to the government was six times the size of the amount lost by the allotment of telecommunications frequencies in 2008 at below market value. The telecommunications scandal, the result of a CAG report, put tremendous pressure on Singh's government, leading to the resignations of top officials and fueling a powerful grassroots protest movement against corruption.

But the national auditor said the report on the coal blocks misrepresented its findings.

"The details being brought out were observations which are under discussion at a very preliminary stage and do not even constitute our pre-final draft and hence are exceedingly misleading," read a portion of the CAG's letter made public by the prime minister's office.

"The leak of the initial draft causes great embarrassment as the audit report is still under preparation. Such leakage causes very deep anguish," it read.

The letter came after opposition leaders sought a discussion in parliament over what they claimed to be a huge scandal.

"This is the worst scam," said Prakash Javadekar, spokesman for the opposition Bharatiya Janata Party. "This government has lost, forfeited its right to continue in power," he said.

Left-wing politicians were equally scathing in their reaction.

"It is a serious scam, a very big scam. In fact, all these scams are taking place because of the wrong policies pursued by the government, favoring all corporate houses, big business houses in the country," said D. Raja, a leader in the Communist Party of India.

He asked why the government had not awarded the coalfields through an auction process.

A lawmaker from the Communist Party of India (Marxist), Sitaram Yechury, called for a wide-ranging investigation.

Before releasing the letter from the CAG, the government issued cautious comments on the matter.

"I cannot comment on the basis of newspaper reports, until I have the actual report (of the CAG)," said Coal Minister Sri Prakash Jaiswal.

He insisted that no coal blocks had been granted during the second term of Singh's government, which began in 2009.

"If the CAG has raised any objections over any such allocations before that, we will be able to make a comment only after studying them," Jaiswal said.

Singh's government has been hit by a series of corruption allegations, including a damning 2010 CAG report about the underselling of the cell phone permits. It put the cost to the government coffers of that affair at around $31 billion dollars in lost revenues.

The telecommunications licenses issued under the sale have since been revoked by the Supreme Court.

A number of politicians, bureaucrats and company executives are facing trial after the telecommunications scandal shook the government. All the defendants have denied any wrongdoing.

Singh's Congress Party, headed by Italian born Sonia Gandhi, paid a political price this month when it suffered a heavy defeat in a key regional vote.

Seen as a litmus test for the popularity of the national coalition, the recent elections in India's most populous state, Uttar Pradesh, gave a decisive majority to a provincial grouping. That was despite a rigorous campaign by the Congress Party to try to revive its fortunes in the region.